If you go with Slicehost and are iffy with your sysadmin skills, take a look at deprec/capistrano, tools that let someone smarter than you handle your sysadmin stuff (at the cost of keeping you ignorant).
This is a good point. You might want to use passenger if you lack sysadmin skills. The big pain of Rails is keeping your thin/mongrel/etc processes running, etc. I imagine a slicehost $20/month slice would run passenger mod_rails just fine and would be fine for your hobby project or something small.
To be clear, it is important to learn how to install Ruby on Rails (or really any package) on a Linux system. deprec and friends are great... until you want some crazy extension that they can't provide for you.
